Samsung customers seek chip ‘second source’ on geopolitical risk

SAMSUNG Electronics said the global technology industry is in search of alternative sources for advanced semiconductors given rising political risks.

Speaking at the South Korean company’s investor briefing, Sim Sang-pil, the head of corporate planning for its foundry business, laid out ambitious goals for the operation, which competes directly with Taiwan Semiconductor Manufacturing (TSMC). Samsung expects to increase its foundry capacity by 3.3 times by 2027 compared with 2022.

“When I meet customers these days, they think the current geopolitical risk is serious; they need their second source,” Sim said. “Samsung foundry has many opportunities with customers who want to have that second source.”

TSMC manufactures the world’s most advanced semiconductors, crafting silicon to meet the designs of clients like Apple and Nvidia. The world’s reliance on that single company, based in Taiwan — which China considers part of its territory — has grown into an area of concern for political leaders in the US and Europe.

As geopolitical tensions have risen between the US and China, businesses have been preparing contingency plans in case foreign companies are no longer able to operate in China or there’s a military confrontation around Taiwan.

Samsung, the world’s biggest maker of memory chips, has been investing heavily to compete for logic processor production orders from large-scale customers like Qualcomm.

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Sim said that Samsung’s foundry was a little behind TSMC in 4-nanometre and 5nm technology, but it sees an opportunity to catch up in more advanced nodes. Samsung’s development of a new iteration of chip design called Gate All Around, or GAA, is one area where the company thinks it will gain an edge over TSMC and US rival Intel.

Samsung is also working closely with the American government, which passed legislation this year to subsidise the development of domestic chip manufacturing. The company is building a new fab in Taylor, Texas, in large part to supply the domestic US market. BLOOMBERG